Keeping accountability in TIF districts
The suburbs came out the good guys in the Cook County clerk's scathing report that says the city of Chicago is misusing funds from special taxing districts.
David Orr is calling for a halt to new tax increment financing districts in Chicago until a new mayor can correct what Orr says has become a “piggy bank” for leaders to spend millions of dollars however they please. At the same time, he praised suburban TIF districts, which he said are being used more prudently.
As a development tool in specific cases, TIF districts can help transform areas into thriving business zones or residential neighborhoods. But while officials in Cook County suburbs may be puffing their collective chests over the report, they must also realize that TIF districts don't come without controversy and are not an automatic the panacea for blighted areas or for redevelopment in general.
In TIF districts, property tax revenues are frozen for up to 23 years, and any increase in collections often is designed to pay for improvements within the area. Their purpose is to restore areas of economic decline when few other options are available.
TIF districts have grown in popularity since the 1980s for good reason. Public improvement projects can increase the real estate values surrounding them and spur even more investment. Particularly when the economy is down, towns are sensitive to businesses' requests for help, and creative solutions are needed. Among the more prominent success stories is the district Hoffman Estates created for Sears in 1989.
Still, they're not a perfect solution and rightly have been criticized as they may benefit only a small area, not an entire population of taxpayers. In addition, government agencies that rely on property taxes receive no benefit when real estate values increase. However, they can work well if leaders:
Ÿ Ensure the process shows no favoritism to developers who are politically connected.
Ÿ Set clearly defined goals on how to use the funds and stick to them.
Ÿ Insist that the public receive a return on its investment, not just developers who profit.
Ÿ Ensure that additional public services and other expenses such as safety and educating children in new residences have the needed funding.
Finally, keeping all records open to public scrutiny must continue. Such transparency may be TIF districts' saving grace in some suburbs. “Maybe because it's smaller (than Chicago), it's easier for the public to have a better understanding of what's going on,” Orr said.
Unfortunately, the shortfalls in Chicago must be made up by other county property owners. Responsible government could have prevented some of the outrage over higher tax bills, and that's something everyone should remember.